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There could be a potential demand for one million pre-owned commercial vehicles (CV) that are 5-10 years old after the vehicle scrapping policy takes effect from October 1, 2021, says Umesh Revankar, Vice-Chairman and Managing Director, Shriram Transport Finance Company (STFC).
This demand is almost equivalent to two years of new CV sales, he reckons.
“We finance vehicles not older than 10 years. People with 15-year-old vehicles usually want to buy another second-hand vehicle which is 7-8 years old.
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“They don’t want to buy new vehicles. For example, to move brick or sand, new vehicles are not needed,” Revankar said.
He sees good demand for five- to 10-year-old vehicles, and this is a sweet spot for STFC as it has been lending to this segment for a long time.
Revankar manages assets (predominantly used and new vehicles) aggregating about ₹1.19 lakh crore at STFC.
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The vehicle scrapping policy, which seeks to promote a clean environment and safety of riders and pedestrians by providing incentives to owners who scrap old and unfit vehicles, has proposed de-registration of CVs after 15 years if they fail to get a fitness certificate.
Private vehicles older than 20 years are proposed to be de-registered if found unfit or fail to renew registration.
In the case of CVs older than 15 years, increased fees for fitness tests and certificates may be applicable as a disincentive measure.
For private vehicles older than 15 years, increased re-registration fees will be applicable.
Further, all vehicles of the central government, state governments, municipal corporations, panchayats, state transport undertakings, public sector undertakings and autonomous bodies with the union and state governments may be de-registered and scrapped after 15 years from the date of registration.
“Normally, when the economy is weak, the demand for new vehicles comes down. Typically, transport operators stick to old vehicles because market conditions are not conducive,” Revankar says, adding, “We also don’t encourage the purchase of new vehicles in this environment. So, we stick to our strength.”
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